Why shouldn’t insurance agents be displaced by an Internet application process?
What makes a “professional” worth more than just minimum wage? What makes the cost of a professional’s opinion worth paying any amount of money? It is responsibility. When a professional is responsible for their opinion you can bank on what they are telling you.
“This is the language from the Sandbulte case that will eventually lead to the complete elimination of insurance agents as we know them today: Plaintiffs' action is based on our language in Collegiate Mfg. Co. v. McDowell's Agency, Inc., 200 N.W.2d 854, 859 (Iowa 1972), which states that "there could have been delegated to defendant [insurance agent] the burden of deciding for plaintiff both the type and amount of insurance to be provided. ..." This would, however, require an "agreement or arrangement which would enlarge defendant's duty beyond the general duty an agent owes his principal." Id. at 857-58. We said such general duty is the duty to use reasonable care, diligence, and judgment in procuring the insurance requested by an insured. Id. at 858.”
Insurance “agents” are not legally responsible for their opinions to consumers and it is the law that makes this a truism. The services they are providing are not really worth what we pay in the form of a commission. So if you can save the commissions by paying a lower premium why not do it?
The Iowa law does not allow consumers to hold agents responsible when a mistake is made in placing casualty insurance. Unless the agent holds themselves out as a specialist, provides counseling and is paid a fee beyond just a commission, the consumer cannot successfully sue them for bad advice on which policy will provide the right coverage.
Now I am not an advocate of Amazon shopping or the Internet business model replacing or even eliminating brick and mortar in our local communities. This is commonly referred to as “disruptive technology”. Plainly put, disruptive technology is technology being used to replace traditional businesses and business relationships. It is Amazon taking customers away from Wal-Mart or Legal Zoom taking clients away from local law firms.
“Internet stores do not have to pay real estate taxes, rent, upkeep, pass-through, or any of the other brick and mortar costs of running local stores. This reduction of traditional costs allows Internet stores an advantage over those who do.”
Long term this is destruction of the local tax base, jobs, and creates a vicious spiral as local residents lose the ability to buy local and for local governments being able to support the local needs. More than being just disruptive, Internet shopping gnaws away at the very economic foundation of a society creating more and more Ferguson’s across America.
Insurance Industry is Outed “As the law now stands in Iowa I would never suggest that an insurance agent provides much if any service having any value. Buying from an online source and saving the commission is a better value. Hiring a lawyer to advise young adults is a better way of getting what you need or at least being advised as to what risks there are in buying bad coverage. The insurance industry has gotten away with a free ride for way too long. The agents provide no advice or bad advice and after an accident they hide from real responsibility. Why shouldn't the Internet disrupt this lousy business model? Why shouldn't they be put of business, especially in rural Iowa?” Attorney Steve Lombardi
But one positive from the disruptive technology business model is the effect it has had on forcing local businesses to provide genuine customer service; a personal touch if you will that makes local businesses more responsive to customer needs. These local businesses must be responsible if they are going to survive in a world that has the ease of the Internet business model.
In this instance no insurance agent will ever take a small fee from a young adult buying his or her first auto insurance policy because agents do not want to be held responsible when the policy is totally inadequate or voided because the customer does not understand that another person who regularly drives the car being insured will following an accident, be an excuse to void the policy, therefore providing the insured with no coverage whatsoever.
The law has not kept up with the Internet age and in this instance it needs to evolve beyond what it has traditionally been. If they do not want to be disrupted out of a job and replaced with simply Internet application processes then insurance agents selling insurance need to evolve along with the Internet and provide real customer services. This mean the agents should be held responsible when simple questions posed to those buying insurance would have uncovered a flaw in the customer’s assumptions or ignorance that will later provide a contractual basis to void the insurance policy.
RESOURCES AND CITATIONS
- Sandbulte v. Farm Bureau Mut. Ins. Co., 343 N.W.2d 457 (Iowa 1984)
- Humiston Grain v. Rowley Interstate Transp., 512 N.W.2d 573 (Iowa 1994)
- Collegiate Mfg. Co. v. McDowell's Agency, Inc., 200 NW 2d 854 - Iowa: Supreme Court 1972
- Iowa Code Chapter 522B Licensing of Insurance Producers
- LANGWITH v. AMERICAN NATIONAL GENERAL INSURANCE COMPANY, Iowa: Supreme Court 2010
The district court granted summary judgment to Fitzgerald and American National, ruling Fitzgerald did not owe a duty beyond a "general duty to procure the insurance requested by the Langwiths," and therefore, Fitzgerald had no duty to advise Dennis Langwith with respect to the coverage provided by Dennis's umbrella liability policy or to render risk-management advice to her client, as alleged by the plaintiffs.